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5.1 Time-series models rely on judgment in an attempt to incorporate qualitative or subjective factors
into the forecasting model.
5.3 The coefficient of correlation expresses the degree or strength of a linear relationship.
*5.4 To make a forecast which is accurate over time requires that we collect data over time.
5.5 One of the most popular qualitative forecasting methods is the Delphi technique.
5.6 A disadvantage of the Delphi technique is that results are obtained slowly.
5.7 Often, a variety of dependent variables may be successfully used in a linear regression forecast of a
single independent variable.
5.11 Tupperware International has successfully identified a single forecasting tool to predict their
company’s product sales.
5.12 A scatter diagram is useful to determine if a relationship exists between two variables.
5.14 Time-series models enable the forecaster to include specific representations of various qualitative
and quantitative factors.
5.15 Qualitative models produce forecasts that are little better than simple guesses or coin tosses.
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5.16 If you need to develop a forecast in a hurry, you probably should not contemplate using the Delphi
method.
5.17 If you need to develop a forecast of sales as a function of advertising expenditure and product
selling price, you should probably consider using one of the regression analysis models.
5.18 One of the benefits of the Delphi method is that no one forecaster is able to unduly influence any
other forecaster.
5.19 When one plots a scatter diagram, the independent variable (X) is always time.
5.20 One of the benefits of using a causal forecasting model is that we are able to eliminate the impact
of random error.
5.21 The fewer the periods over which one takes a moving average, the more accurately the resulting
forecast mirrors the actual data.
5.22 An advantage of exponential smoothing over a simple moving average is that exponential
smoothing requires one to retain less data.
5.23 An advantage of exponential smoothing over a simple moving average is that the exponential
smoothing model can be extended to include a trend term.
5.24 The notion of a seasonal index can only be associated with time-series forecasting.
5.25 A correlation coefficient of +0.75 implies that the forecasted variable increases as the independent
variable increases.
5.26 The purpose of a tracking signal is to help us estimate the forecast error at each data point.
5.27 Adaptive smoothing is analogous to exponential smoothing where the coefficients and are
periodically updated to improve the forecast.
*5.28 One of the advantages of using a scatter diagram is that it may suggest types of formatting
techniques that are appropriate.
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*5.29 One of the advantages of using a scatter diagram is that it may suggest types of formatting
techniques that are not appropriate.
MULTIPLE CHOICE
5.31 A weighted moving average having the early periods more heavily weighted
(a) "eyeballing."
(b) the exponential smoothing method.
(c) the causal forecasting method.
(d) the MAD technique.
(e) least squares.
5.35 Which of the following is (are) not characteristic of the scatter diagram?
(a) The independent variable is usually measured on the horizontal (X) axis.
(b) The dependent variable is usually measured on the vertical (y) axis.
(c) It is useful to get a quick idea as to whether any relationship exists.
(d) It is helpful in determining what is cause and what is effect.
(e) none of the above
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5.36 Which of the following university/commercial statistical computer packages has a forecasting
technique?
(a) BIOMED
(b) SAS
(c) SPSS
(d) Minitab
(e) all of the above
5.37 One thing not true about the coefficient of correlation is that it
5.38 If computing a causal linear regression model of Y = a + bX and the resultant r 2 is very near zero,
then one would be able to conclude that
5.39 Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14,
12, 13, 15. Forecast sales for the next day using a 2-day moving average.
(a) 14
(b) 13
(c) 15
(d) 28
(e) none of the above
5.40 Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14,
12, 13, 15. Forecast sales for the next day using a 3-day weighted moving average where the
weights are 3, 1, and 1 (the highest weight is for the most recent number).
(a) 12.8
(b) 13.0
(c) 70.0
(d) 14.0
(e) none of the above
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5.41 Enrollment in a particular class for the last four semesters had been 120, 126, 110, and 130.
Develop a forecast of enrollment next semester using exponential smoothing with an alpha = 0.2.
Assume that an initial forecast for the first semester was 120 (so the forecast and the actual were
the same).
(a) 118.96
(b) 121.17
(c) 130
(d) 120
(e) none of the above
5.42 Enrollment in a particular class for the last four semesters had been 120, 126, 110, and 130.
Suppose a 1-semester moving average was used to forecast enrollment (this is sometimes referred
to as a naive forecast). Thus, the forecast for the second semester would be 120, for the third
semester it would be 126, and for the last semester it would be 110. What would the MSE be for
this situation?
(a) 196.00
(b) 230.67
(c) 100.00
(d) 42.00
(e) none of the above
5.43 A tracking signal was calculated for a particular set of demand forecasts. This tracking signal was
positive. This would indicate that
5.44 Regression was used to develop a model to predict sales based on advertising dollars spent. The
equation developed is Y = 1000 + 20X, where X is advertising dollars and Y is sales. If $300 is
spent on advertising, what would be the best prediction for sales?
(a) $1,600
(b) $7,000
(c) $1,620
(d) $6,000
(e) none of the above
5.45 Regression was used to develop a model to predict sales based on advertising dollars spent. The
equation developed is Y = 1000 + 20X - 2Z, where X is advertising dollars spent by your company,
Z is the price for the product, and Y is sales. If $800 is spent by your company on advertising, and
the price is set at $100, what would be the best prediction for sales?
(a) $17,200
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(b) $6,800
(c) $7,200
(d) $16,800
(e) none of the above
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5.51 As one increases the number of periods used in the calculation of a moving average,
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5.54 If computing a causal linear regression model, Y = a + bX, and the resultant r 2 is very near zero,
then one should conclude that
5.55 Enrollment in a particular class for the last four semesters had been 120, 126, 110, and 135. The
best forecast of enrollment next semester, based on a 3-semester moving average, would be
(a) 126.
(b) 135.
(c) 120.
(d) 123.
(e) 125.
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5.56 The correlation coefficient resulting from a particular regression analysis was 0.25. What was the
slope of the regression line?
(a) 0.5
(b) -0.5
(c) 0.0625
(d) There is insufficient information to answer the question.
(e) none of the above
5.57 A tracking signal was calculated for a particular set of demand forecasts. This tracking signal was
negative. This would indicate that
5.58 Given that the MAD for the following forecast is 2.5, what is the actual value in period 2?
(a) 120
(b) 98
(c) 108
(d) 115
(e) none
5.59 Given that the MSE for the following forecast is 9.5, what is the forecast value in period 3?
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(a) 108
(b) 118
(c) 128
(d) 115
(e) none of the above
5.60 Assume that you have tried three different forecasting models. For the first, the MAD = 2.5, for
the second, the MSE = 10.5, and for the third, the MAPE = 2.7. We can then say:
*5.61 Which of the following is not a problem with moving average models?
*5.62 In picking the smoothing constant for an exponential smoothing model, we should look for a value
which
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*5.63 Which of the following model types would likely be the best for predicting the number of
automobiles sold next year?
(a) Delphi
(b) Sales force composite
(c) Regression
(d) Multiple regression
(e) none of the above
*5.64 For which of the following forecasts would you expect it to be most appropriate to use a multiple
regression model?
*5.65 When San Diego Hospital forecast the number of patient days for each upcoming month, they used
a simple regression model. Had they needed to forecast the number of available beds by day for
the upcoming months,
(a) a simple regression model would have been more than adequate.
(b) a moving average model would have been more appropriate.
(c) a multiple regression model should have been used.
(d) an exponential smoothing model would have been best.
(e) none of the above
PROBLEMS
5.66 For the data below, develop a 3-month moving average forecast.
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5.67 Use exponential smoothing with = 0.2 to forecast the battery sales. Assume the forecast for
January was 22 batteries.
Month Automobile
Battery Sales
January 20
February 21
March 15
April 14
5.69 City government has collected the following data on annual sales tax collections and new car
registrations:
5.70 Let us hypothesize (imagine) that the number of automobile accidents in a certain region are related
to the regional number of registered automobiles in thousands (b1), alcoholic beverage sales in
$10,000 (b2), and decrease in the price of gasoline in cents (b3). Furthermore, imagine that the
regression formula has been calculated as:
Y = a + b1 X1 + b2 X2 + b3 X3
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where Y = the number of automobile accidents, a = 7.5, b1 = 3.5, b2 = 4.5, and b3 = 2.5
Calculate the expected number of automobile accidents under the following conditions:
X1 X2 X3
(a) 2 3 0
(b) 3 5 1
(c) 4 7 2
5.71 Calculate (a) MAD, (b) MSE, and (c) MAPE for the following forecast versus actual sales figures.
Forecast Actual
100 95
110 108
120 123
130 130
5.72 Demand for a particular type of battery fluctuates from one week to the next. A study of the last 6
weeks provides the following demands (in dozens): 4, 5, 3, 6, 7, 8 (last week).
(a) Forecast demand for the next week using a 2-week moving average.
(b) Forecast demand for the next week using a 3-week moving average.
5.73 Daily high temperatures in the city of Houston for the last week have been as follows:
93, 94, 93, 95, 96, 88, 90 (yesterday).
(a) Forecast the high temperature today using a 3-day moving average.
(b) Forecast the high temperature today using a 2-day moving average.
(c) Calculate the mean absolute deviation based on a 2-day moving average.
5.74 Average starting salaries for students using a placement service at a university have been steadily
increasing. A study of the last four graduating classes indicate the following average salaries:
$20,000, $22,000, $23,000, and $25,000 (last graduating class).
Predict the starting salary for the next graduating class using an exponential smoothing model with
= 0.2. Assume that the initial forecast was $20,000 (so that the forecast and the actual were the
same).
5.75 A firm conducted a careful analysis of the cost of operating an automobile. The following model
was developed:
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(a) If a car is driven 15,000 miles this year, what is the forecasted cost of operating this
automobile?
(b) If a car is driven 25,000 miles this year, what is the forecasted cost of operating this
automobile?
(c) Suppose that one car was driven 15,000 miles and the actual cost of operating was $6,000,
while a second car was driven 25,000 miles and the actual operating cost was $10,000.
Calculate the mean absolute deviation for this.
5.76 The following multiple regression model was developed to predict job performance as measured by
a company job performance evaluation index based on a pre-employment test score and college
grade point average (GPA).
(a) Forecast the job performance index for an applicant who had a 3.0 GPA and scored 80 on the
pre-employment score.
(b) Forecast the job performance index for an applicant who had a 2.5 GPA and scored 70 on the
pre-employment score.
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5.77 Given the following data, if MAD = 1.25, determine what the actual demand must have been in
period 2 (A2).
*5.78
For the data below, develop a 3-month moving average forecast.
*5.79 Use exponential smoothing with = 0.3 to forecast the battery sales. Assume the forecast for
January was 22 batteries.
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Month Automobile
Tire Sales
January 20
February 21
March 15
April 14
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SHORT ANSWER/ESSAY
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*5.95 In what way might it be said that all forecasting models are subjective?
*5.96 Explain, briefly, why most forecasting error measures use either the absolute or the square of the
error.
*5.97 Explain, briefly, why the larger number of periods included in a moving average forecast, the less
well the forecast identifies rapid changes in the variable of interest.
*5.98 Explain, briefly, why, in the exponential smoothing forecasting method, the larger the value of the
smoothing constant, , the better the forecast will be in allowing the user to see rapid changes in
the variable of interest.
*5.99 Explain, briefly, why the Delphi forecasting approach is probably the most useful of those
discussed when attempting to forecast fifty to one hundred years into the future.
*5.100 The decomposition approach to forecasting (using trend and seasonal components) may be helpful
when attempting to forecast a time-series. Could an analogous approach be used in multiple
regression analysis? Explain, briefly.
*5.101 What are some of the basic assumptions we make when using simple linear or multiple regression?
*5.102 What is one advantage of using causal models over time-series or qualitative models?
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